Markets march higher on economics and earnings – Zurich Weekly Review 9th August 2021

U.S. Markets hit record highs last week with strong earnings and a positive
jobs report the main drivers. Employers added 943,000 jobs in June which
was well above consensus estimates and the best reading of 2021. Data for
April and May was also revised upwards as the unemployment rate fell to a
post pandemic low of 5.4%. PMI data was also encouraging with the services
reading jumping to 64.1, well above expectations. Whilst the manufacturing
reading came in lower than expected (59.5), both metrics are firmly in
expansion territory. There is also some early evidence that supply chain
bottlenecks are starting to ease slightly.
With 90% of companies having now reported, the S&P 500 is on track to see
earnings per share come in 15% ahead of consensus forecasts. 72% of
companies have beaten expectations on both EPS and sales, which makes it
the strongest quarter for earnings this century.
Eurozone equities also saw a strong week helped by earnings, whilst bond
yields (which move inversely to price) moved lower as COVID delta variant
fears lingered. Germany looks set to make masks a requirement on public
transport until the new year as authorities grapple with reopening timings
across Europe. The Bank of England met last week and stated that ‘some
modest tightening of monetary policy’ could happen over the coming
months. With inflation on the rise across the developed world, the policy path
of central bankers will continue to be a key theme throughout the rest of this
year.